M&A / FundingProptech

Roofstock snaps up $240M for accessible single-family rental investing

Roofstock, an end-to-end online platform for single-family rental investing, announced a healthy equity financing injection today after closing a $240 million Series E round led by SoftBank‘s Vision Fund 2. With new capital on hand, Thursday’s funding brings Roofstock’s valuation to $1.94 billion.

Through its platform, the nearly seven-year-old Oakland, Calif.-based proptech is attempting to tackle and transform the $4 trillion fragmented industry that is single-family rentals, or SFRs.

The company offers an online marketplace where users can both buy and sell rental homes in more than 70 U.S. markets. Some of these properties have tenants already residing in them, giving investors the opportunity to buy and sell the home without the renters being forced to vacate.

When it comes to alternative investments, single family rentals are tough to beat. Since 2010 single-family rentals have consistently increased by about 3% annually, and in Q3 2021 posted the fastest year-over-year increase in the past 16 years.

“There has never been a time quite like this for single-family real estate, and Roofstock is truly at the vanguard of making the market work for everyone,” said Gary Beasley, CEO and co-founder of Roofstock. “We’re grateful for the continued support from our new and existing investors and stakeholders who share our vision to make this a modern, radically accessible asset class.”

Roofstock’s latest round also included participation from existing and new investors including Khosla Ventures, Lightspeed Venture Partners, Bain Capital Ventures, Canvas Ventures, Citi Ventures, First American Financial and a slew of others.

Fresh funding abound, Beasley told FinLedger its financing will be spread across various avenues of M&A, product development and doubling its growing Roofstock team.

The proptech made a number of strategic acquisitions in recent years including property management tech platforms Great Jones and Streetlane Homes as well as Stessa, an asset management software platform for single-family investors. Through Stessa, Roofstock aims to grow its suite of products for landlords to include analytics and banking-related services.

Looking ahead, Beasley told FinLedger its acquisitions will look to scale its existing programs of property management as well as new products to integrate into its marketplace like financing, insurance or title. Longer term, Beasley believes Roofstock is poised for global opportunity, with M&A being a logical first step for breaking in to other geographies and exporting its tech abroad.

With nearly 15,000 homes already under management, Roofstock has also begun to hint at it gravitating towards the increasingly popular short-term rental (STR) space. The proptech already hosts a number of STRs on its platform, with good feedback, Beasley noted.

“We’re not trying to compete with Zillow or some of these other groups that cater primarily to owner-occupant homeowners. What we are focused on are products and services for investors. That’s our bread and butter,” said Beasley.

According to Roofstock, those services are about to get a big boost as the proptech plans to further enhance its Roofstock One offering to accredited investors.

The proptech also aims to rapidly scale its Investment Services offering which allows institutional investors to leverage Roofstock’s full-stack cloud platform to build their own bespoke SFR portfolios, for which Roofstock can also offer property management. In 2021, the company purchased thousands of homes on behalf of its institutional clients, representing over $1 billion in assets.

The company is also investing to help further improve accessibility and liquidity in the SFR asset class. It recently was accepted into the Cypher Accelerator program at the Stevens Center for Innovation in Finance at the University of Pennsylvania’s Wharton School to help accelerate its real estate tokenization initiative.

“I’ve often joked that blockchain has been a bit like a solution in search of a problem,” Beasley told FinLedger. “And there are a lot of problems in the way real estate works today. It’s slow to transact, it’s expensive, it lacks transparency. So blockchain and tokenization could be a game changer for trading properties in a frictionless way.”

Blockchain veteran Geoffrey Thompson is leading Roofstock’s efforts to create a tokenized home product as part of the accelerator program. At an April deadline, Beasley said the company will present a live product that will allow users to buy a token that owns the economics to a rental home that is already financed, insured and managed. When a user is ready to sell, rather than having to list the home for sale, users can just post the token in a low friction environment.

“It’s something that we think has real promise. Whether it’s clicking a button to tokenize homes off our marketplace, or bringing homes to us that you want us to tokenize or us going out, finding homes, tokenizing them and just selling the tokens. There’s a whole host of things that, if this works the way I think it could, it could be a massive unlock for our retail,” Beasley told FinLedger.

On top of product growth, Roofstock is also set to expand its product, engineering and data science teams to help facilitate these product expansions as well as its ops, marketing and support teams. Beasley said the company intends to really build out its Stessa team on the asset management side.

“We have a really loyal customer base right now, probably 125,000 owners who own roughly 350,000 homes. But we want to effectively triple that this year,” Beasley said.

With revenues nearly tripling year-over-year and organic investor platform traffic growing even faster, the company is in a period of hypergrowth. Since its founding, Roofstock has facilitated more than $5 billion in transaction volume, more than half of which came from the last year alone. 

“With Roofstock, you get to leverage the best-in-class data and analytics out there as a retail investor or as an institution. We’ve leveled the playing field for investors of all sizes,” said Beasley. “We’ve built some pretty cool tech that you can leverage without necessarily being an expert, but you end up getting expert results because you’re on our platform.”

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